GS Labs, LLC v. Medica Insurance Company

Background

GS Labs, Inc. was formed in January 2020 as a clinical laboratory in Omaha, Nebraska. During the COVID-19 public health emergency, it opened testing sites throughout the United States, including nine in Minnesota. GS Labs alleged that it tested about 90,000 Minnesotans, including about 16,000 people insured by Medica Insurance Company.

GS Labs performed COVID-19 diagnostic tests without requiring prepayment and then sought reimbursement from Medica. It alleged that it billed Medica at the cash price publicly posted on its website, as authorized by Section 3202(a) of the Coronavirus Aid, Relief, and Economic Security Act, commonly called the CARES Act. Medica requested medical records and, according to GS Labs, still refused to provide full reimbursement.

GS Labs asserted claims for a CARES Act violation, a declaration that it could seek reimbursement under the Act and was entitled to its posted cash price, unjust enrichment, negligence per se, and punitive damages. GS Labs moved for partial summary judgment on its declaratory-judgment claim. Medica moved to dismiss all claims for failure to state a legally sufficient claim.

CARES Act claims

Section 3202(a) requires a health plan or health insurer without a previously negotiated rate to reimburse a diagnostic-testing provider at the cash price listed on the provider’s public website, unless the parties negotiate a lower rate. The court considered whether that provision creates an implied private right of action—that is, a right for a private party to sue even though the statute does not expressly provide one.

The court concluded that it does not. The statutory language directs health plans and insurers to reimburse providers, but the court found that it focuses on the entities being regulated rather than clearly creating an enforceable right for diagnostic-testing providers. The court also found that the statute’s primary beneficiaries were patients, because the broader statutory scheme was intended to make COVID-19 testing available without cost sharing.

The court found no clear congressional intent to create a private right or remedy for providers. It acknowledged that the reimbursement provision contains no express enforcement mechanism for providers seeking cash-price reimbursement, but held that the absence of an enforcement mechanism was not enough to establish congressional intent. The court found the remaining factors either neutral or not unfavorable to inferring a federal cause of action, but stated that congressional intent was determinative and was lacking.

State-law claims and disposition

After dismissing the federal claims, the court declined to exercise supplemental jurisdiction over GS Labs’s Minnesota-law claims for unjust enrichment, negligence per se, and punitive damages. Supplemental jurisdiction is a court’s authority to hear related state-law claims alongside federal claims. The court relied on the case’s early stage, the limited resources invested in the ruling, and the interest in allowing Minnesota courts to address Minnesota-law issues.

The court dismissed Counts I and II with prejudice because GS Labs had no private right of action under the CARES Act. It dismissed Counts III, IV, and VI without prejudice after declining supplemental jurisdiction. The court denied GS Labs’s motion for partial summary judgment, granted Medica’s motion to dismiss, and directed the clerk to enter judgment because no claims remained.